BUSN 3rd kelly mcgowen chapter7

7 BUSN Small Business & Entrepreneurship: Economic Rocket Fuel ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 7 Small Business and Entrepreneurship: Economic Rocket Fuel • Why entrepreneurs launch small businesses? • What is the typical entrepreneurial mindset and characteristics? • What are funding options for small business? • What are the opportunities and threats facing small businesses? • What are ways to become a business owner and facilitate success? • What is the size, scope and economic contribution of small business? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Small Business & Entrepreneurship: Economic Rocket Fuel Launching a New Venture: What’s in It For Me?  Greater Financial Success  Independence  Flexibility  Challenge  Survival BUSN “ Business opportunities are like buses…there’s always another one coming Richard Branson, Virgin Enterprise “ ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part BUSN Small Business & Entrepreneurship: Economic Rocket Fuel The Entrepreneur: A Distinctive Profile ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Small Business & Entrepreneurship: Economic Rocket Fuel The Entrepreneurial Mindset: A Matter of Attitude • Not every small businessperson starts as an entrepreneur • The difference is a matter of attitude • 70% of small business owners say they don’t want to grow any larger • Classic entrepreneurs’ ideas can dramatically change the world Henry Ford, Walt Disney, Bill Gates, Martha Stewart…… BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Small Business & Entrepreneurship: Economic Rocket Fuel Finding the Money: Funding Options for Small Business  Personal Resources  Loans  Angel Investors  Venture Capital BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Small Business & Entrepreneurship: Economic Rocket Fuel Opportunities and Threats for Small Business: A Two-Sided Coin Opportunities: Opportunities: •• Market MarketNiches Niches •• Personal PersonalCustomer CustomerService Service •• Lower LowerOverhead OverheadCost Cost Technology Technology BUSN â2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 7 Small Business & Entrepreneurship: Economic Rocket Fuel Opportunities and Threats for Small Business: A Two-Sided Coin Threats: – Higher Risk of Failure – Lack of Knowledge and Experience – Too Little Money – Bigger Regulatory Burden – Higher Health Insurance Costs BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Small Business & Entrepreneurship: Economic Rocket Fuel Opportunities and Threats for Small Business: A Two-Sided Coin Source: Business Employment Dynamics data: survival and longevity, II by Amy E Knaup and Merissa C Piazza, September 2007, Monthly Labor Review, Bureau of Labor Statistics website, http://www.bls.gov/opub/mlr/2007/09/art1full.pdf, accessed February 15, 2009 BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Small Business & Entrepreneurship: Economic Rocket Fuel Failing with Style • Walt Disney was fired from an ad agency for a “singular lack of drawing ability.” • Ray Kroc, McDonald’s founder, failed at real estate, he didn’t discover the McDonald brothers’ hamburger stand until he was 52 years old • Steve Jobs, founder of Apple computer, was dumped by his board of directors, but returned a decade later to launch the iMac and the iPod Your failure may be the first step of the next big thing BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 10 Small Business & Entrepreneurship: Economic Rocket Fuel Launch Options: Reviewing the Pros and Cons • Starting from scratch • Buying an established business • Buying a franchise BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 11 Small Business & Entrepreneurship: Economic Rocket Fuel Starting a Business from Scratch Key Pros: Key Cons: • It’s all you : Your concept, your decisions, your structure • You don’t have to deal with the prior owner’s bad decisions • It’s all you That’s a lot of pressure • It can be hard to get credit • Logistics can be challenging • It takes time, money, and sheer sweat to build a customer base Source: Five Reasons Why Franchises Flop by Steve Strauss, February 28, 2005, USA Today Money website, http://www.usatoday.com/money/smallbusiness/columnist/strauss/2005-02-28franchise_x.htm BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 12 Small Business & Entrepreneurship: Economic Rocket Fuel Buying an Established Business Key Pros: Key Cons: • The concept, organizational structure, and operating practices are in place • Working with someone else’s idea may not be fun • Relationships are established • You may inherit old mistakes • Obtaining financing is less challenging Source: Five Reasons Why Franchises Flop by Steve Strauss, February 28, 2005, USA Today Money website, http://www.usatoday.com/money/smallbusiness/columnist/strauss/2005-0228-franchise_x.htm BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 13 Small Business & Entrepreneurship: Economic Rocket Fuel Buying a Franchise Key Pros: Key Cons: • Partnering with established brand • Less opportunity for creativity • Possibility of assistance with management and financing • Tied to national brand’s mistakes • Low failure rate • Purchase price and ongoing royalties can be steep Source: Five Reasons Why Franchises Flop by Steve Strauss, February 28, 2005, USA Today Money website, http://www.usatoday.com/money/smallbusiness/columnist/strauss/2005-02-28franchise_x.htm BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 14 Small Business & Entrepreneurship: Economic Rocket Fuel Making it Happen: Tools for Success • Small Business Administration • Gain Experience • Learn from Others • Educate Yourself • Business Plan BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 15 Small Business & Entrepreneurship: Economic Rocket Fuel The Business Plan  Executive Summary  Description of Business  Competitive and Industry Research  Marketing Strategies  Operating Procedures  Personnel  Financial Projections BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 16 Small Business & Entrepreneurship: Economic Rocket Fuel Small Business and the Economy: An Outsized Impact • In 2007, 99.9% of the 200,000 businesses in the U.S had fewer than 500 employees • 6% of small business owners ran their business without any employees • In the past decade, 60 to 80% of the net new jobs were created by small businesses • Creating New Jobs • Fueling Innovation • Vitalizing Inner Cities • Small businesses employ half of the nation’s private workforce BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 17 Small Business & Entrepreneurship: Economic Rocket Fuel Tempting Targets Big business is targeting small businesses because their numbers add up to BIG BUSINESS Minipreneurs – an army of individuals launching super small scale enterprises Micro businesses Web-Driven Entrepreneurs BUSN Freelancers Weekend Entrepreneurs Free Agents ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 18 Small Business & Entrepreneurship: Economic Rocket Fuel Entrepreneurship around the World • Entrepreneurship has an economic impact around the world • Although the economy has decreased individuals perception of opportunities, intentions to start a new venture has not declined  People are afraid of losing their jobs and are considering entrepreneurship more seriously  Potential entrepreneurs may be more optimistic about their own ability  Potential entrepreneurs may be delaying launch for three years when the downturn might be over BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 19 Small Business & Entrepreneurship: Economic Rocket Fuel Entrepreneurship around the World Entrepreneurship around the word depends on:  Per Capita Income  Opportunity Cost  Cultural/Political Environment Source: Global Entrepreneurship Monitor, 2008 Executive Report by Niels Bosma, Zoltan J Acs, Erkko Autio, Alicia Coduras, and Jonathan Levie, Babson College and London School of Economics, http://www.gemconsortium.org/article.aspx?id=76 , published January 15, 2009, accessed February 17, 2009 BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 20 Looking Back • Why entrepreneurs launch small businesses? • What is the typical entrepreneurial mindset and characteristics? • What are funding options for small business? • What are the opportunities and threats facing small businesses? • What are ways to become a business owner and facilitate success? • What is the size, scope and economic contribution of small business? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 21 ... and facilitate success? • What is the size, scope and economic contribution of small business? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted... What’s in It For Me?  Greater Financial Success  Independence  Flexibility  Challenge  Survival BUSN “ Business opportunities are like buses…there’s always another one coming Richard Branson,... scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part BUSN Small Business & Entrepreneurship: Economic Rocket Fuel The Entrepreneur: A Distinctive Profile